Break-Even Sales Under Present and Proposed Conditions Darby Company, Operating at full capacity, sold 163,500 units at a price of $48 per unit during the current year. Its income statement is as follows: Sales $7,848,000 Cost of goods sold 2,784,000 Gross profit $5,064,000 Expenses: Selling expenses $1,392,000 Administrative expenses 832,000 Total expenses 2,224,000 Income from operations $2,840,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 30% 70% expenses Management is considering a plant expansion program for the following year that will permit an increase of $624,000 in yearly sales. The expansion will increase fixed costs by $83,200, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs 2,616,000 Total fixed costs 2,392,000 32 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost 16 Unit contribution margin 3. Compute the break-even sales (units) for the current year. 74,750 units 4. Compute the break-even sales (units) under the proposed program for the following year. 77,350 units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $2,840,000 of income from operations that was earned in the current year. 163,500 X units 6. Determine the maximum income from operations possible with the expanded plant. 7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? Income